egypt's new islamist back constitution is reportedly on track to pass the public ballot with most of the votes now counted this after a month of violent protests and fierce clashes that analysts think will not be quelled by news of the result. moscow a step closer to banning all adoptions of russian children by americans the move has been triggered by an increasing number of abuse cases and even some deaths. no you don't want for christmas is festive shopping fever gathers pace we look at what gifts risk ending up in the garbage the very next day. kaiser report coming up next

stay with us here on r.t. . the. max keiser welcome to the kaiser report it's been five years since the beginning of the global financial collapse governments are eating their own debt vomit central banks are smoking their own belly button lint and analyst still don't know whether we have deflation inflation hyper inflation stacy herbert max three we have crazy felicia and we're going to try to determine this will get a little bit closer to whether we have inflation deflation hyperinflation in this i guess my dad the fear of money fairy queens. but it is a funny little difference there the central banking revolution will end in disaster

this is what money week says and there are of course talking to the complete abandonment of any inflation target remember for a few years there we've been pretending that central banks are independent that they are monitoring inflation trying to maintain the value of our currencies but ben bernanke has said he's going to keep rates at zero until unemployment is at six point five percent barry ritholtz has done the art on that he's done the chart on that and he reckons it's twenty eighteen until we get to six point five percent unemployment mark carney who's coming into here at the bank of england he says that he's going to start targeting nominal g.d.p. right barry ritholtz as an artist with the charts. but yes of course the problem with the global system is that they have the wrong model it's not that the banks stole billions it's not that they monitored billions and committed massive fraud no doubt the model was wrong we were targeting the wrong thing so we're going to

change the my. model and we're going to double down on fraud double down yeah like that and now money week says that central banking might just work if it was genuinely independent if you had central bankers who are willing to do the whole counter cyclical thing we might have a more stable economy in other words the central banks were willing to raise interest rates to temper boo's rather than just slash them to it levy bust then they might do some good river their propaganda is that they can't predict they can't see booms they can't see bubbles they can only wipe them up but they say that they're finding deflation so that lower rates but the truth is that they cost inflation by lowering rates and those you know anything about the way monetary systems work at this point in the system and in the game by raising rates you would actually increase the amount of inflation in the system thus increasing the

possibility for economic growth by getting rid of the deadwood and by making it profitable for banks to lend again right now it is not profitable for them to lend so they're just sucking on the teat of the central banks that are giving away the central bank's largest ferry so. well you know you mentioned deflation and central bank and ferries and for over twenty years now japan has been in this state of deflationary collapse and now we have a new prime minister in voted in to really end this time to really really really stop it this time and japan's new government to get aggressive incoming prime minister albay values stimulus lower interest rates japanese voters max on sunday ousted the current government and set the stage for a new prime minister who is valued to adopt a large stimulus cut interest rates and take more measures to revive growth in the

. third biggest economy right i mean look if you look at what the bank of england recently said vet by cutting rates they benefited homeowners and mortgage owners by seventy billion pounds at the same time they took from pensioners and savers one hundred forty billion pounds so it's not like they are you know people say oh the pentagon money out of thin air the printing of money in it it's not coming from anywhere that's also false because actually what they're doing is they're transferring money from savers and from the pension industry and from the insurance industry which is now screaming bloody hell because these low interest rates are making it impossible for the insurance industry to operate as an ongoing business here the japanese voter has voted for what they call an aggressive policy not only militaristically against china but they say they want more aggressive currency war and yet if you look at the last twenty years they've been violently aggressive in the currency war look at iceland iceland has collapsed

their economy collapsed their banking system collapsed why because of the carry trade because of zero percent interest rates in japan i remember when we made that film money guys or we cover glenn stevens of the reserve bank of australia who said that there was something very strange about a g. three country have giving away free money.

because everybody's made the comparison to what we're going through to the great depression and we all know what central bankers believe and that is that world war two got us out of the great depression so it's no coincidence i think that you see

the same sort of alignments the same sort of geo political tensions going on yeah we're definitely headed for a war once you have a good for the us because it's not a shooting each other they're going to shoot somebody else part of this banking revolution the central banking revolution as the first headline calls it which i don't think it's central banking revolution i just think it's outright war on an armed people around the world moody's gets no respect as bonds fifty six percent of country ratings so the global bond market max disagreed with moody's investor service and standard and poor more often than not this year when the companies told investors that governments were becoming safer or more risky yields on solvent securities moved in the opposite direction from what they said fifty three percent of the time or fifty six percent of the time in the case of moody's so you know experts analysts interviewed in this piece for bloomberg said well governments

should stop listening to the bond market because when they introduce a stary they say it's because we don't want to downgrade from moody's. well there you know getting back to the dance of the money fairies and you know the movies in the rain again he sees nobody believes them because they were caught cooking the books for these banks and taking bribes for ratings so they're completely discredited meanwhile the bond market the bond vigilantes as they were called into the clinton administration have been neutralized due to the government's buying back their own debt their monetizing their own debt although they don't call it that because they know that would be scary so they call quantitative easing so they're no longer in the picture and the ability for any price signals to get through the noise of the corruption is now completely zero so we have an economy entirely based on false signals where people can be buying and selling twinkies on e bay for eight thousand dollars while having their pensions eviscerated by chinese housewives speculating in the forex market for national debt max following

decisions of the arbiters of credit risk is less reliable than flipping a quote for determining borrowing costs so what's the point what's the point of any of these animals any of these bankers any of these brokers any of the rating agencies yes but here's the here's the grim truth of it all all analysts reports on wall street have not done better than flipping a coin for fifty years all of the hedge funds performance on it and say in a five to ten to fifteen year basis on a one quarter basis have not done no better than flipping a coin for in their performance all of the pundits on t.v. everyone it comes on sandy say their track record for predicting results other than fifty fifty coin flips is exactly zero so there that's what an economy is all about capitalism is about uncertainty that's what makes it dynamic because the losers end up funding the winners it's different than in a centrally planned system where you have no mystery whatsoever and you just have

a slow burning prism but unfortunately you've got the worst of both worlds in the us you've got the price fixing of the fed what the slaughter of the general population so it's kind of like a casino galactic where the only hope to get out of it is to win on lotto meanwhile you're playing video games and eating twinkies all day. well moody's has downgraded six point four government ratings for every upgrade in the u.s. and europe even so max european bonds are having their best year since one thousand nine hundred ninety eight returning eleven point five percent through december fourteenth well in this case i must say that for the past four years i've gone on record many many many times that the euro crisis was completely fake and now i just based my analysis on one very important issue and that is that germany is a global superpower and that there was no way that this euro project was going to go down no matter what nigel thanks however you read into the next paragraph in

this article and they do point out once again why are they. moving to the opposite of what the rating agencies say well that central bank revolution max central banks buying unprecedented amounts of government securities to pump money into their financial systems and keep interest rates low is also driving the divergence between ratings and bond performance the e.c.b. for example has bought nine hundred twenty four billion dollars worth of bonds and they say they've just said that they'll buy spanish and italian debt if if that becomes an issue yet and behind all that debt purchased is the one area in the world of the biggest gold court in the world twelve thousand tons in toto which is bigger than anyone else except for the general population of india but they're not terribly well organized all right stacy ever thanks so much for being on the cars report. stay tuned for the second half we'll be speaking to peter schiff.

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welcome back to the kaiser report i'm max kaiser we're nearly five years into the global financial crisis back in two thousand and seven two thousand and eight when the crisis began there were very few voices out there warning about and then explaining the collapse five years into this crisis let's go to one of them the man who needs no introduction peter schiff of shift radio dot com peter welcome back to the kaiser report thanks for having me on max all right peter schaeffer first of all i want to get into a simple question what is the exit strategy for these central banks that have taken on hundreds of billions of dollars of bad debt they have no exit strategy that's been my point from the very beginning when the fed first started talking about an exit strategy back in two thousand and nine i wrote a commentary and i said there was no exit strategy that the fed and checked into

the roach motel of monetary policy. meaning they could get in but there was no way to get out because the fed is the bond the big buyer in the bond market they are pretty all this money they're buying bonds they're buying mortgages they have trillions now they're back she is going to grow now by a trillion dollars a year how can they possibly withdraw that liquidity how can a cell wall those bonds and all those mortgages who's going to buy them right now peter were saying the same thing all over the world the central banks keep going down this suicidal path bank of japan just announce or they have a new leader going to buy quadrillion and bad debt they want to lower their currency they want to lower their interest rates again this is been going on for years now you correctly called it brilliant book and crash proof and this will and it seems to me there is a dead certainty at one hundred percent guarantee that the the end result of this will be a currency collapse yes or no well the currencies will go down dramatically relative

to gold and some currencies will go down quite a bit relative to other currencies but at some point central banks are going to face a choice between destroying the currency and destroying the phony economy is that there are cheap money policies have helped to inflate but but either way it's going to be extremely painful course the worst possible outcome is if we destroy the currency because then we'll have an economic crisis even worse than the one that we're going to get if we save the currency but sacrifice the bubble economies ok so you have this we can see the end is is i don't see how we're going to avoid a currency collapse but be in term years between two thousand and seven two thousand and eight and that currency collapse there's this debate going on is that inflation is deflation but these terms seem misplaced because they are only valid within the context of a central bank and economy that is functioning and along the rules of law

and logic but you can't even use those terms can. new because this is what you can't. have to look at prices if you want to measure that in terms of real money and what economies need is deflation deflation is a big part of the cure no prices need to come down particularly asset prices that are too high look americans can't afford to buy houses because they're just too expensive prices have to come down the prices have to adjust but the government won't let it happen and so they create inflation to fight off the deflationary forces that naturally develop in the economy but the problem for people who are looking at deflation they go back and they look at periods of time where we had on this money where we were on a gold standard and they see what happened they don't understand the difference between real money that you can create out of thin air and currency that you can create at zero cost in incident amounts and when you have central banks and

governments with this power they are going to use it and so they will continue to create inflation in till ultimately the deflationary forces are overwhelmed and you potentially andries unleash hyper inflation and you destroy the currency i mean people forget look at countries that have got into trouble with printing press money it always ends the same they destroy their currency and you don't see the currency gaining value and prices falling but if you look at any of these hyper inflation and you measure prices in gold there was deflation going on beneath the surface but you couldn't see it if you were looking through the prism of a currency and the same thing is happening or will happen in the united states if you're going to measure prices against the dollar prices are going to rise because they could rise dramatically but if you measure them in terms of goal they're going to fall right now they get back to a point where there is a natural flow you could call deflation as economies become more productive prices

tend to go down we see this in electronics and just. and the banks will offset this by printing money but what we've seen something here which is a breakdown in the i guess you could call it the transmission mechanism because the central banks are printing money but it's not really circulating in the general economy it's it's going right into asset price inflation so you're saying things the specter of bubbles you're seeing a lot of bubbles right now there's a bubble in london real estate there's a there's a bubble in the bond market the bond market the u.s. treasury bond market and the u.k. gilt market they're trading at two hundred to three hundred year highs these are in bubbles right. well absolutely in fact part of the dynamic that is feeding this is the federal reserve prints money to buy u.s. treasuries and now the u.s. government takes that money and it spends it into circulation what it sends out so security checks what it sends out on climate checks what it pays the soldiers and now everybody takes this money and they go to wal-mart and they buy imported

products or they go to the gas station they buy imported oil and now the money flows out and now china gets it or saudi arabia gets it and what do they do with it did their citizens take that money and spend it on american products you know they take the money and they buy u.s. treasuries with it so even though we're printing all this money it's not bidding up prices in america it's bidding up bond prices because the money we create gets sent to china or saudi arabia we're choose to buy treasuries that's where the inflation is showing up you have inflated bond prices but eventually that bubble has to burst because nobody wants bonds for the sake of owning bonds bonds represent a claim on on well a claim on on purchasing power on consumption and at some point the people holding our bonds are going to cash them in and actually buy something with the money and that's when all the inflation comes back to america america's shores like a tsunami coming in from asia and it's going to overwhelm us because now all the

paper money is going to come in and it's going to bid up the price of everything that's not nailed down right dates of buns in america are trading at a two hundred forty year high and they're in this massive bubble and when this bubble pops and the bonds crash that's that's the same thing as a currency crash how do you how do you avoid that and when people say well the bond market will never crash because the fed could just print infinite amounts of money to buy up all the bonds to prevent the prices from crashing but if they do that then the dollar will crash and the bonds are worthless anyway i mean if you want. how do we avoid a currency collapse this is what i'm saying there is no avoiding and that you know i will be in this statement today last week that was completely felonious that that of the government stop buying treasury bonds the somehow interest rates would go a lower i mean that's that's it that's an irresponsible statement to make when the government is buying all of these trends ninety percent of the bonds being issued is

a massive asset bubble collapse but the problem is my point is that the bond bubble collapses either way either either the fed stops buying or they destroy the dollar but the only way to avoid a complete currency collapse would be for the fed to do what it's been resisting all these years and that is to start stop buying treasuries allow interest rates to skyrocket which of course is what they're going to do and then let the chips fall where they may let the banks fail and don't bail them out don't even bail out the depositors' when when they went when when the banks fail and forced the government to restructure instead meaning the government cannot repay what it is borrow the government has to acknowledge that it's borrowed more money than the taxpayers can legitimately repay and we need to restructure we need to go through a structured bankruptcy where our creditors take a haircut bondholders people who are planning on getting so security benefits government pensions medicare everybody's got to be leveled with and everybody's got

to take a haircut otherwise the whole country is going to get a crew cut. peter your analysis is spot on because it's a simple mathematics but you know stuff a twenty pounds into a five pound bag you know that's what it boils down to so but your timing has not been perfect but let's look at twenty thirteen peter is that is a paper apocalypse upon us or are they going to fudge this for another you know twelve months or so what do you think. well look you know nobody's timing could be perfect especially when you have giant governments all around the world you know in this game doing whatever they can to postpone the pain and then you have cooperation of the private banks and investors and a lot of them just don't even understand what's going on and so they continue to buy you know to buy this nonsense and you know the longer it goes on people like me and i'm not the only one who's been pointing this out but as we point out the

problems and then there's no armageddon immediately all the sudden people start to say you see there's no reason to be worried all the naysayers and doom and gloom words were wrong look there's no inflation and they just keep on you know whistling past this this graveyard how can we get out of two thousand and thirteen without a a major crisis i suppose we suppose we can we might not but the problem is the longer the bankers and the politicians succeed in delaying it the worse is going to be because the only way to delay the consequences is to exacerbate the underlying problem right so they the point of timing is what israeli a poison chalice because the longer we wait for the inevitable the worse it gets now imagine governments of course that governments have been caught rigging these bond markets the bank of england was caught working with barclays in reading live board so now the central banks are not only engaged in faulty ideological money buying and money printing but they're engaged in outright fraud as we now know with

bank of england and of course they are in concert with other central banks i want to ask you though a question because you have often pointed to governments and saying governments are the culprit in all of this and we've had this discussion going on really going back years where i have said we know the banks certainly should share some of this blame now recently we've had a situation where the bank here in the u.k. h.s.b.c. that was caught. financing terrorism laundering money for now. drug cartels and they're involved in the library scandal with all the other banks so isn't it about time peter schiff that you know we start to look specifically at these individual banks and say they're running a criminal enterprise that we they're they're very much a part of this problem peter well i think the problem though emanates from the government and the power and protection it can extend to these banks it's it's like no one to set out this entity that is corrupt and that can peddle its influence to

the highest bidder once you start that game then it's like well can i blame the bankers for playing that regain to their advantage you know it's like if you want to kill the steak you got to cut off the head and the head of the snake is the government and the federal reserve and their power to create money out of thin air and the regulations and the taxes that they impose on the economy to benefit their friends and punish everybody else so it starts at the top and if we take away the power from government then the bad banks will fail and competition you know will be allowed to work and we'll have you know free market capitalism but yes there is a lot of corruption in the banks but you've got to look at the source it's emanating from washington and from the central bank all right peter schiff for all time thanks so much for being on the kaiser report and that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert i want to thank my guest peter schiff if you want to send me an e-mail please do so at times to report it r t t v are you next i'm asked as i've.

been eliminated. you know how sometimes you see a story and it seems so for lengthly you think you understand it and then you glimpse something else you hear or see some other part of it and realize everything you thought you knew you don't know i'm tom harvey welcome to the big picture.